Coal India News Update..

In some of my previous posts, I had written about selling Coal India 420 and 440 calls. Recently, there have been some news regarding increase in domestic coal price to align with international price (http://www.business-standard.com/india/news/plan-panel-for-raising-coal-prices/448331/). Planning commission argues that Indian coal prices are significantly lower than the international prices, which should be done away with over the next 2-3 years. This would have significant positive impact on Coal India. But recommending increase in prices is one thing and implementing the same, is different. There have been several panel reports on diesel price deregulation, but still nothing has been done. In this high inflation scenario, I don’t think government will have the courage to increase coal prices.

There have been some news report about decline in Coal India output decline in last month (http://www.livemint.com/2011/09/01152408/Dengue-takes-toll-on-Coal-Indi.html). These are operational issues which do come up during rainy season.

CAG report on Coal India was released recently (http://www.moneycontrol.com/news/business/cil-operates-239-mines-without-environmental-clearance-cag_583851.html). It says Coal India is operating large number of its mines without environmental clearance. I don’t think this will have significant impact on PSU stock. All of us have seen what happens to CAG reports ? Government and the Ministry involved question the assumptions, and opposition parties blame the government. End of the day nothing happens and report bites dust.

Given all this news environment, I still think Coal India will find it tough to cross 410-420 level in September series. But I have bought one 400 call to protect my sold 420-440 call options.


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